Final answer:
Insurance companies compare E/M levels of service to manage reimbursement rates, prevent adverse selection, and negotiate better rates due to their large client base.
Step-by-step explanation:
Insurance companies compare E/M levels of service distribution among providers and physician practices to ensure that the reimbursement rates are in line with the level of risk and services rendered.
doing so, companies protect themselves against adverse selection, where individuals with knowledge of higher risks may take advantage of the system, increasing costs for the insurer.
Comparing E/M levels also helps insurance companies to negotiate better rates for their large client base, increasing the efficiency and effectiveness of resource allocation in health maintenance organizations (HMOs) and fee-for-service systems.